Market to consolidate at higher level

The market is expected to consolidate at high levels, after the recent rally. The Q2 September 2007 earnings season has ended. The market is expected to take a pause before making the next move in absence of near term triggers. Spells of high volatility cannot be ruled out.

Sensex had surged 2546.89 points or 14.73% to 19,837.99 on 31 October 2007, registering its biggest monthly rise in four and half years. The S&P CNX Nifty gained 17.51% to 5900.65 in the month.

However, a sharp fall is not expected to due to tremendous liquidity waiting to enter at market. FIIs have been the key drivers of the recent rally. They pumped in Rs 20,591 crore in the month of October 2007. FII inflow in calendar year 2007 totaled Rs 71,985.10 crore (till 31 October 2007). Any slowdown in inflow by FIIs may put brakes on the rally.

Global commodity prices have also been surging along with equity markets. Crude oil prices are now eyeing $100 and $125 per barrel based on the recent momentum which is as a matter of concern.

Much will also depend on how Asian markets pan out. Over the recent past, domestic markets have been taking cues from them

The European Central Bank (ECB) is expected to keep interest rates unchanged which currently stands at 4% in its meeting scheduled on 8 November 2007. Meanwhile, the Bank of England is also expected to hold interest rates at 5.75% when it meets on 8 November 2007.